Basically what I'm trying to find out is if the money you put towards development in the race funding tab makes it cheaper to use advanced technology in your road cars or if it increases the amount of research points your team gets per quarter.
It does a few things actually.
First off, its main effect is increasing your team's ability/xp. The more you develop the team, the easier it will be for them to win. If you slide the slider closer to win, over time they'll lose ability. Thus making it harder for them to win. So you may want to spend a few years developing, then a few years focus on winning, and when you start losing, move back to developing...
Winning effects image, both racing and global, which have a great effect on sales.
The second effect is increasing Research and Development skills which effects Design Skills as well random costs values and hidden rating points baked into component/vehicles. Note however, the pace at which skills change is capped. So at some point you're not really gaining anything from focusing on racing development. Also RnD Skill has a very small effect. You would notice a difference between 10 skill points and 100 skill points, but not really between 10 and 20.